QUESTION From: Mihran in NJ
“What are the benchmark financials everyone goes by? As in food %, rent %, labor % etc.?”
This is one of the most common questions I get on a monthly basis and, not to be difficult, but the answer is “It depends”.
It depends upon several factors namely; concept, location, covers, contiguous uses, menu, market draw, etc...
While many may tell you to shoot for the common benchmarks of 20-25% food cost, 5-9% rent, 18-20% labor, etc.. one size does not fit all.
I’ve seen more failures and/or money left on the table due to operators ignoring their MARGINS and/or opportunities to sustain their business on more available volume while remaining inflexible in being tied to unobtainable percentages for their particular concept.
E.G.- I have clients that are paying almost 15 to 20% rent but, knowing that we were going to face that, we developed the concept in this high traffic location to support and justify that #.
I really do prefer a more holistic approach to financials...and that requires a deep dive into any existing or planned project so really can’t say what’s best for you.
I often see operators trying to back into the numbers which sometimes works but is not a reliable method in my opinion.
That being said, I’ve never seen a venture succeed with a 50% food cost or 40% labor.
I’m available for consulting;)